In India, some procedures have to be followed by organizations for initiating exports.
An organization should be registered with Director General of Foreign Trade. The regional licensing authority gives the registration to exporters.
The exporters issue the applications to the regional office of Directorate General of Foreign Trade along with the following documents:
a. Individual’s profile
b. Copy of pan number
c. Copy of sales tax registration certificate
d. Three passport size photographs
e. Certificates from banks to ensure the credibility of exporters and importers
f. Prescribed government fee
Exporters can gain relevant information regarding trade by taking membership of the export promotion councils.
These councils assist in the following:
a. Help in knowing the emerging trends and opportunities in the global market
b. Provide an opportunity to interact with the importers and exporters of other countries
c. Assist in getting useful information on developing exports
d. Help in getting advice or information on technological upgrading
It is important for exporters to join one of the councils related to their field of business. The membership would be subjected to the rules and regulations framed by the respective councils.
An organization needs to follow the steps shown in Figure-8 to become a successful exporter:
The description of these steps is given as follows:
1. Setting the organization:
Involves the important decision of either forming a partnership, sole proprietary organization, or a company.
2. Selecting the mode of operation:
Refers to the fact that an exporter can act as either a merchant exporter or manufacturer exporter, as explained in the following points:
(i) Merchant Exporter:
Refers to the exporter who buys the goods from the manufacturer and then sells them to foreign customers.
(ii) Manufacturer Exporter:
Refers to the exporter who manufactures goods for the exporting agent who acts on behalf of the seller and charge commission.
3. Naming the organization and selecting the product:
Act as important step as it influences an export organization to a large extent. The name of the organization should be attractive and meaningful.
In addition, the trade name and logo of the organization should reinforce its image in the minds of its customers. The product to be exported should be selected after full analysis. It should be ensured that all governmental policies are adhered while selecting the product.
4. Selecting the markets:
Refers to deciding the target markets to export products. Various factors, such as political stability, demand stability, tariff and non-tariff barriers, language issues, and transport issues, need to be considered for selecting the markets.
The information regarding the international market can be collected from the export promotion councils, Indian Institute of Foreign Trade (IIFT), foreign embassies, and research documents.
5. Selecting the buyers:
Implies targeting the customers for selling products. The information about customers can be taken from the export promotion councils, international yellow pages, trade research journals, and international magazines. The customers can be attracted by organizing trade exhibitions and providing advertisement in newspapers and magazines.
6. Selecting the channels of distribution:
Implies opting the best distribution channel for the effective delivery of products.
Following are some of the international distribution channels:
(i) Export consortia:
Refers to a voluntary alliance of organizations to promote each other’s products through joint actions. Cooperation comes before competition in export consortia.
(ii) Direct exports:
Imply direct distribution to the distributors or retailers in the foreign country.
(iii) Export agent:
Refers to an individual or organization that acts as an exporter on behalf of local manufacturers and charge commission. An export agent helps in promoting the products, finding the markets, and locating the foreign customers.
7. Processing an export order:
Involves verifying, checking, or carefully examining various items after receiving an export order.
These items are mentioned as follows:
i. Product description, such as style, color, labeling, and packing
ii. Terms of payment
iii. Terms of shipment
iv. Inspection requirements
v. Insurance requirements
8. Entering into export contract:
Helps in avoiding any further dispute between an importer and exporter.
An export contract can take the following three types of forms:
(i) Proforma invoice:
Refers to a bill prepared by the exporter to be sent to the importer. The bill is signed by the importer after accepting all the terms and conditions and a copy is sent back to the exporter.
(ii) Purchase order:
Refers to an order sent by the importer to the exporter. After checking the order, the exporter accepts and signs it and then it is sent back to the importer.
(iii) Letter of credit:
Takes the form of the contract that is issued by the importer’s bank in favor of exporter.
9. Deciding Export Pricing and Costing:
Depends upon various factors and differs from exporter to exporter.
Examples of such factors are as follows:
i. Range of products offered
ii. Frequency of purchase
iii. Aggressive marketing and sales promotion
iv. After-sales service in products
v. Product differentiation and brand image
vi. Supply of products
vii. Competitor’s prices.